A review of balancing costs in Italy before and after RES introduction

Abstract

The massive introduction of RES in electricity markets is recognized to have induced a merit order effect on wholesale prices. While day-ahead prices are likely to decline as RES-E production increases, the effects on balancing market sessions are more ambiguous. Taking into account the Northern Italian zone characterized by a high solar PV and hydro penetration, we provide empirical evidence that balancing quantities decreased while costs increased between two samples associated with low (2006-08) and high (2013-15) RES levels. We estimate balancing costs for different technologies and compare their dynamics across specific hours. We find evidence of increasing balancing prices in particular market conditions, that we interpret as a signal of strategic use of real time sessions by conventional producers prone to the merit order effect in the day-ahead market. We compare our results to those obtained in the German market (where, on the contrary, balancing costs have decreased) and postulate that the different market designs may explain these results. Our findings suggest that Italian policy makers should carefully monitor all trading sessions, especially those close to real time, to avoid the exercise of market power by few operators allowed to guarantee system security and, additionally, to promptly adopt a capacity market.

Selection of Calibration Windows for Day-Ahead Electricity Price Forecasting

“…• Nord Pool (NP; Northern Europe)-a hydro-dominated (over 50% of generation) market exhibiting strong seasonal variations, • PJM Interconnection (Northeastern United States)-the world's largest competitive wholesale electricity market with a balanced generation mix (ca. a third of coal, gas and nuclear), • EPEX Germany and Austria (Central Europe)-a developed market with a rapidly growing share of renewables (wind, solar and biomass; currently over 33% of generation) and pronounced negative prices; the latter are natural in electricity trading-since plant flexibility is limited and costly, incurring a negative price for a few hours can actually be economically optimal [34,39].…”

Understanding intraday electricity markets: Variable selection and very short-term price forecasting using LASSO

“…Note, that negative prices are natural in electricity trading -since plant flexibility is limited (especially for coal fired power plants) and costly, incurring a negative price for a few hours can actually be economically optimal(Gianfreda et al, 2018;Schneider, 2011;Weron, 2006).…”

Short-term electricity trading for system balancing: An empirical analysis of the role of intraday trading in balancing Germany's electricity system

“…A handful of papers discuss intraday markets in the Nordic region [14], Italy [15], the Iberian Peninsula [16] and Germany [17]. This paper also relates to studies that assess the impact of factors such as renewable energy generation and forecast errors on intraday market prices [15,16,[18][19][20][21][22] or balancing markets [23,24]. The study most similar to ours is probably that of Remppis et al [25], who assess the impact of 15-min trading on balancing energy needs.…”